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Buying a home provides a lot of stability for a family. The lack of a down payment or a poor credit history, though, often stops some individuals from buying a home. Through rent-to-own opportunities, these individuals also can realize their dreams of homeownership. Renting to own, though, requires some extra work.

1

Find rent-to-own homes by checking local rental listings in newspapers and on Craigslist. Many times, an ad will specify that it is available on a rent-to-own basis.

2

Inspect the home. Make sure it is a home that you want to buy. Check on the condition of the interior and exterior of the home. Ask neighbors about the home. Ask questions to the real estate agent or owner.

3

Review the provisions of the rent-to-own contract. Typically, a contract specifies the monthly lease payment amount, the initial fee required for the rent-to-own option, the length of the lease period and the option to purchase, which gives the tenant the right to purchase the home at the end of the lease period.

4

Negotiate the purchase price. The purchase price is usually set at the time the rent-to-own contract is signed. As in all home purchases, the buyer can offer any amount, and the seller has the option of rejecting or accepting the amount. If accepted, that amount will be reflected in the contract.

5

Negotiate other contract terms. While the contract has already been prepared, you can request changes. The owner of the property might be willing to alter the contract to meet your needs. A key negotiating point is a monthly rental credit. This is an amount the owner sets aside out of each lease payment. The buyer can use this amount as credit toward the purchase.

6

Sign the contract once you are in agreement on all of the provisions of both the rental contract and the option to buy contract. These can be combined into one contract, but they also can be separate contracts.

7

Pay the option fee. This is not a deposit. Instead, it is a fee paid to secure the right to purchase the home. It is rarely refundable. It can be applied as a credit toward the purchase price when such language is included in the contract. The fee is often equal to 2 to 5 percent of the purchase price.

8

Secure a mortgage loan from a bank or another type of lender. You will need to apply for the mortgage loan and receive approval. The mortgage loan must be for at least the purchase price minus any credits accrued through lease payments.

9

Close on the home. At closing, you will be required to pay any down payment amounts required by the lender and any other closing costs. You also will sign paperwork. The seller will sign over the deed.

Tip

Explore a mortgage loan well in advance of the end of the lease period. It takes time to process a mortgage loan application, and the rent-to-own contract terms can limit the amount of time at the end of the lease period during which you can purchase the home.

Warning

Avoid a rent-to-own agreement when housing prices are declining. The value of a home can drop substantially over a short period of time, and the home might not be worth the established purchase price at the end of the lease term. This makes it unlikely that a bank will offer a mortgage loan for the home.

About the Author

Based in Central Florida, Ron White has worked as professional journalist since 2001. He specializes in sports and business. White started his career as a sportswriter and later worked as associate editor for Maintenance Sales News and as the assistant editor for "The Observer," a daily newspaper based in New Smyrna Beach, Fla. White has written more than 2,000 news and sports stories for newspapers and websites. He holds a Bachelor of Arts degree in journalism from Eastern Illinois University.